Interview with Dr. Meredith Rosenthal: C. Boyden Gray Professor of Health Economics and Policy

Interview By Daniel Wilentz

Dr. Meredith Rosenthal is the Director of Graduate Studies for the Harvard PhD Program in Health Policy and the Faculty Chair for Harvard’s Advanced Leadership Initiative. She received her Ph.D. in Health Policy on a Economics track from Harvard University. She primarily focuses her research on policies aimed at enhancing the affordability and quality of healthcare in the United States. Her work has played a significant role in shaping provider payment systems in both public and private spheres. Additionally, she has provided guidance to federal and state policymakers regarding healthcare payment policy development and implementation.

Daniel Wilentz (DW): Thank you for meeting with me today. How did you first become interested in healthcare policy and affordability in the US and how did that shape your career?

Meredith Rosenthal (MR): I became interested in health policy in part because I have always been interested, as long as I can remember, in reproductive health and women's health. And at the same time, I was studying economics and looking for a way to combine the thing that I cared a lot about with the thing that I was pretty good at. And that's literally how I came across health economics. It's an area where economics has a lot to contribute. I have found over the course of my 25 year career here that there are always new and important questions like this that arise where economics is useful, and the other tools that health policy gives us can also help us, we hope, lead to better decisions.

DW: Originally, I found you through your article you worked on “Novel Alzheimer's Disease Treatments and Reconsideration of US Pharmaceutical Reimbursement Policy”. Can you talk about some of your work with that?

MR: One of the areas that I've been interested in throughout my career is the affordability of healthcare and all the consequences that affordability, or lack thereof, have on people's health. Their access to care shows how equitable that access is. So this piece in JAMA about new Alzheimer's treatments and their costs and some of the policy considerations comes out of that work. I was asked to write this editorial to accompany clinical trial results for the second Alzheimer's drug to be approved by the FDA, although it wasn't approved at the time to be considered by the FDA for approval. This is of interest, for a couple of important reasons, I would say first, Alzheimer's disease is an enormously impactful illness, both for the people who have it, about 5 million people in the US and for families, and it's been a really long time coming for these treatments to work their way through the pipeline. There have been a lot of failures in treatments that people had hoped would work.

Second, the medications themselves that are working their way through approval are going to be offered at very high prices. In the case of the drug that I was writing about, the expected price was about $28,000, which is about the median income for a family, so that's really troubling. But again, the potential benefits could be enormous. When I talk a little bit about how we should think about those costs relative to the benefits. What we know from clinical trials, of course, they're done on a very narrow sample, typically for approval, whereas the people who ultimately get a medication can be quite different from the people who are in the clinical trial, and the setting is very different. The people in the clinical trial get a lot of monitoring and a lot of engagement, so in the case of these drugs there are a lot of concerns about risks and a lot of unknowns about how those are going to play out in the real world setting versus the clinical trial setting.

The last big issue is even if these drugs are incredibly high value, which to an economist means they're expected benefits exceed their expected costs,we may not be able to pay for everyone to get these drugs. And then the question is, how are they going to be rationed? Will they be rationed based on the people getting them who need them the most? Or, to people who can afford to pay some out of pocket cost to get the drugs? Those are the kinds of issues that I discussed in the article. And, and while the article is really focused on Alzheimer's treatments, it also is raising this question of whether it’s time for the U.S healthcare system, which is very decentralized and includes a lot of private actors, to be more systematic about deciding who gets what, and how much we're willing to pay for these treatments.

DW: I also read another one of your articles: “Is the increasing adoption about your cost? Caps, benefits and the consequences and policy opportunities.” Can you talk about the effectiveness of these out of pocket costs caps overall and their negatives and positives.

MR: This goes back across the thread of my interest in affordability. I had a similar paper on a similar topic, talking about how burdensome out of pocket costs are becoming even for people with pretty good private insurance. As insurance becomes more and more expensive, our employers have to decide how generously they're going to cover their employees' benefits. And so these are these trade offs that employers make in general in the interest of the average employee. But of course, there's some employees who have more health needs than other employees and as health insurance premiums have gone up over time, this kind of out of pocket cost has gone up to the extent that some people with what we think is good insurance don't get the medicines they need. And so in the paper with Frank Wharram, we were reflecting on some recent policies and laws that have tried to limit the amount that people have to pay out of pocket, particularly for life sustaining treatments like insulin for diabetes. These laws come from a good place. The goal is to make sure that people get the care they need, but by just setting a ceiling on the amount that the employee pays or the enrollee pays, it doesn't lower the total cost. It just means the insurer or the employer has to pay the rest and it essentially sends less of a signal back to the manufacturer of the drug that they need to lower their costs. We also talk about how if we have the same cap across everyone, people with higher incomes also have their out of pocket costs kept even when they can afford to pay a higher amount. Because limiting the out of pocket amount doesn't make the additional costs go away, it's still paid for in the premiums. So we could inadvertently be redistributing from the sick to the wealthy, so that's a concern. I think the issue that it raises, one of the real challenges in our healthcare system, is that we have all of these different actors playing a role in the system. I mentioned employers, insurers, patients, manufacturers, there are these other entities called pharmacy benefit managers. It's not at all transparent, so we could do something well meaning but in that very convoluted system, it could have the opposite effects to the ones that we were aiming for.

DW: Over your career working in health policy, what do you believe is the most important piece of information you've learned about all of our systems and how we have to move around them?

MR: I would say what I've learned is that the simplest solutions are not always the best ones because of things we can't ascertain. The other thing that I've learned is that the system we have in the US is set up in a way where there are stakeholders with their own interests, and it can be very hard to change. We're always writing about these great new ideas about how to reform the system, but the status quo is very strong. For reform to happen, we need to have really savvy political operations, and not just good ideas, because we need to recruit all of the important stakeholders in the interest of making the system better, and that can be very challenging. It's particularly challenging right now for federal policy, and state policy isn't always easy either, so that kind of complexity and vested interest create real challenges for health policy reform. At the same time, we have seen some big changes in the last 20 years, the Affordable Care Act being the biggest one in the US, but the relatively recent drug price negotiations that were part of the Inflation Reduction Act, of course, are being challenged in court.

DW: Thank you. Regarding another article of yours, “Utilization, Steering, and Spending in Vertical Relationships Between Physicians and Health Systems”. What do you think the benefits and consequences are of these relationships between our primary care physicians and the larger health systems. How do they interact with each other and how does that contribute to the cost on the patient?

MR: We hope that being part of a larger system will lead to better opportunities to coordinate care, to reduce redundancies, and share information. Also, some primary care practices may be very small and they can't afford to invest in the most sophisticated technologies to help manage patients, so being part of a larger system might help them improve their quality. Unfortunately, the evidence to support those aspirations is pretty thin. What we do find behaviorally, in that paper, is that those primary care physicians, when they're part of large systems, are more likely to refer their patients to those large systems. Those larger systems have higher prices and therefore, in addition to raising primary care prices, all the downstream costs are going to increase as well. So it seems pretty clear that vertical integration of primary care physicians into health systems is going to increase costs. We don't have all the data yet on whether an improves quality, but our early results find no strong effects in that direction and most of the literature in this space around healthcare consolidation finds little evidence of quality improvement, so that's, that's clearly concerning. Antitrust enforcement is also a very difficult challenge in healthcare, and neither the federal nor the state governments have been terribly successful. It ultimately comes down to the fact that it's very hard to measure quality and, and healthcare institutions can make a lot of claims about quality benefits that are hard to discount.

DW: What do you think are the largest issues facing healthcare affordability and access in the US today, and what sort of solutions can be implemented to address them?

MR: One of the most important questions in part is the affordability question because I see affordability as necessary for equity and the two things are really very much entangled. There are definitely other health equity issues that are also important, but we need to get a handle on affordability. I think antitrust enforcement is a big piece of what we need to do to make healthcare more affordable. The consolidation that we've seen in the last decade has clearly taken a toll on prices. And so, if antitrust enforcement is not an effective tool, the other tool left to us to control prices is price regulation, but there is not a lot of appetite for that kind of price regulation. I mentioned earlier that prescription drug price negotiations that the federal government has undertaken. Those are still nascent and it's not clear how far we'll get. There's a lot of work that is inside the delivery system trying to encourage or require health systems to have to manage global budgets to basically make the health systems responsible for keeping costs within some fixed budget, but that has not been implemented in a very strong way yet. Those kinds of global budgets under the label of ACOs, accountable care organizations, are capitation; they haven't generated much in the way of savings. In theory they could, but again, thinking about the stakeholder politics, for those kinds of provider payment systems to really have an effect, they would need to be much more rigorous than they are now. Often, health systems are eligible for a small bonus or penalty for having costs, above or below respectively, a target. But, those systems are voluntary, so that's a huge challenge.

DW: Are there any issues in health politics that you're currently analyzing that should be addressed more overall?

MR: I've been spending a lot of time trying to better understand what's happening in the Medicaid program, which is a federal state joint program. While the federal government kind of sets a floor and a set of rules, Medicaid is highly variable across the states. And so, there's a lot to learn from state by state experiments. Some of what I've been looking at is focused on payment reform. And in particular, some states are trying to use the way they pay for health care and Medicaid to improve health equity. I'm really interested in that and trying to understand what they're doing and what works. Medicaid is a really essential program in the US. It covers a variety of groups, but, in general, Medicaid covers groups of people with low incomes and it's a huge opportunity to try to address affordability and access by making that program work better.

DW: Thank you so much for meeting to discuss your perspectives.